Question of the Day
What Makes the Perfect Buy-to-Let?
Video Transcript
Is this the very best property, for a buy-to-let, is it the perfect property for a buy-to-let?
That’s a question we got asked in today’s Question of the Day, from a client.
Unfortunately, there’s no quick or simple answer. There are so many variables, as to whether that buy-to-let or any buy-to-let property, is going to be right for you, for me – for any property buyer that is considering it.
There isn’t one thing that we can say, ‘Just look at this or make sure that this is in place and everything’s good’.
And to give some further context to that question, it was from a client that was looking to buy a property that they had found on a property search portal.
It is in Sheffield. It’s a three-bedroom property. It is, I think, on the market for about 150k. The rent is about 700pcm or 725pcm. And they were looking at it, as a buy-to-let, longer-term plan.
Now, for some clients, looking at that, they might not be interested because of the location, because of the rental yield or, potentially, because of the price.
It might not be in their price range or of a good enough condition.
These things matter when it comes to seeing and assessing if that buy-to-let property, is going to be right for you.
Now, specifically for this client, what they also wanted, was a property that would also be a good family home for them, if they ever needed to move back to the area.
So, they have this extra dynamic at play, that really impacts what decision they’re going to make on a particular property.
So, it’s very difficult for any, one person, to say, that a specific property is going to be the perfect buy-to-let or that any property is going to be the perfect buy-to-let.
The easiest way, we would say, to assess it, is to consider the fundamentals.
We have a property checklist, on our site, which covers 7 different categories.
And those categories cover things like tenant profile, rental yield and exit strategy.
These are the things that you need to consider if you want to assess one particular property, compared to another, to understand if it’s going to be the right buy-to-let property or the right opportunity, for you, to move forward with or add to your portfolio.
Now, once you have those key criteria, in those key categories, that are relevant to you, for your plans and your aims, the next stage is to try and understand nuances to each of those.
So, let’s take rental yield, for example.
Personally, for our portfolio, we try and target properties that are around 7%+ gross, rental yield for buy-to-lets.
Other investors might be looking for higher and others might be happy with lower if it’s in the perfect location.
But if you don’t know what that variable is, just saying, ‘We are going to be focussing on rental yields as our headline criteria…’ When you are assessing deals, you have nothing to use as a barometer, to compare like-for-like or to see if it’s the right type of property.
And then you also want to consider other, secondary metrics. Things like the tenant profile.
So, it might be the right rental yield, but is it the right tenant profile, for you?
Because the wrong tenant profile, with a good rental yield, is going to be a very difficult property to manage and maintain and to own, for a particularly long period of time, if that’s what your ambition is.
Trying to understand these metrics, trying to understand what your particular and personal criteria is, for your buy-to-let property, is very important.
I don’t think, that there is anybody out there, who is going to be able to say, that this or any property, is the right or the perfect buy-to-let property, for you.
Once you have that criteria, create some rules-of-thumb and create some personal guidelines.
If it’s the yield, what sort yields you want? If it’s an exit strategy, how quickly might you need or want to sell that property, in the future? In what sort of timeframe?
If it is tenant profile, what is your perfect tenant profile?
Those sorts of things.
And then it makes it much easier when you’re assessing your next property opportunity.
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